Be Careful What You Bargain For, You Might Just Get It

By Attorney Gregg Herman
July 14, 2011

When the Wisconsin Supreme Court chose to accept review of Topolski v. Topolski, No. 2009AP2433, I wondered why, especially after the court had rejected review of several family law cases where its input would’ve been useful.

On July 8, the high court issued its decision in Topolski, which — yawn  — did nothing to change my mind, or to justify the time and effort expended by this court in granting review.

The issue presented was whether the husband’s receipt of disability benefits paid under the terms of a pension plan required him to start making payments due to the wife under the unusual, if not unique, terms of their marital settlement agreement.

Under those terms, payments of $912 per month were to start if and when the husband started receiving “pension and retirement benefits.”  Oddly, both parties had waived maintenance and there was no Qualified Domestic Relations Order, as would be typical, which the Supreme Court mentioned in a footnote.

However, the husband suffered several strokes and qualified for disability benefit to replace his income until the retirement plan kicked in.  For reasons that are unclear, the wife thought she should benefit from her ex-husband’s disability and commenced a contempt action.

Remarkably, Waukesha County Circuit Court Judge James Kieffer – normally, a wise judge – agreed with her and interpreted the parties’ agreement as requiring him to pay $912  per month from his disability benefits, rather than having to wait until he reached retirement age as they had agreed.  (Even more remarkabe: two justices, Patience Drake Roggensack and David Prosser, agreed with the trial judge).  The circuit court found the husband in contempt for failing to comply with the agreement and entered judgment against him.

On appeal, however, the Court of Appeals, in a summary decision, reversed the circuit court order finding the husband in contempt and concluded that the wife was not entitled to any more than she had agreed to at the time of divorce – that is, the payments would start when the husband reached the age of 65.  The entire intermediate appellate court decision is four pages, including a half page for the caption and nearly a full blank page at the end after the remand order.  You can almost count the words.

Chief Justice Shirley Abrahamson’s decision filled 29 pages, and cited exactly one family law case (other than in footnotes), to conclude as follows:

  1. The agreement’s reference to “all retirement, pension, and deferred benefit accounts” did not address disability benefits.
  2. The husband’s disability pension under the pension plan, beginning when he was 53 years old and continuing until he attained the age of 62, replaced lost wages and therefore did not constitute a retirement, pension, or deferred benefit account under the terms of the agreement.
  3. The husband’s disability pension under the pension plan when he reaches the age of 62 does, however, constitutes a retirement, pension or deferred benefit account under the agreement, and therefore, the husband must commence payments at age 62  if and when the husband receives the disability pension under the pension plan at his 62nd birthday.

The key to the holding is the following language: “This holding places the husband and wife in the same position they would have been in had the husband not become disabled.  This gives both the husband and wife exactly what they bargained for in the Marital Settlement Agreement.”  ¶73.

So, the total message of this case is: Be careful what you bargain for, because that is what you’ll get.

Duh.

As stated earlier, the Supreme Court decision does nothing to explain why it accepted review.  The agreement is interesting only in its failure to provide for a QDRO and its strange order dividing the pension.   For example, it is totally uncertain whether the payments are expected to be deductible to the husband and taxable to the wife.  Of course, the pension payments are fully taxable to the husband, and the failure to provide for a QDRO and the waiver of maintenance seems to contemplate after-tax payments.  Why the husband would agree to this is unknown.

In addition, the actual plan that was in existence at the time of divorce was not part of the record.  Rather, the trial courts, and therefore the appellate courts, relied on a later document that might – or might not be – the same one the parties were utilizing at the time of divorce.  While the Supreme Court attempted to justify its review by defining the terms “retirement” and “disability,” due to the unusual facts of this case, these definitions will be of little use in cases where those terms need to be defined carefully.  After all, how can a court ferret out the parties’ intent from a document that no one possesses?

If the Supreme Court was only wasting their time by reviewing a case that involved unusual facts, unlikely to recur, it would be harmless.  However, in the process, the court use some disturbing language that might cause substantial problems in future cases.

Consider the following sentence:

“When and to the extent that a disability benefit replaces the disabled spouse’s post-divorce wages, the benefit should be characterized as income and will be individual property not subject to property division at divorce.” ¶54.

Let’s consider how many ways that one sentence can wreak havoc in other cases:

  1. The term “individual property” creates confusion with the classification scheme under Chapter 766.  We’d hoped this confusion was alleviated by the use of the terms “divisible” and “non-divisible” property as used in the seminal case of Derr v. Derr, 2005 WI App 63, 280 Wis. 2d 681, 696 N.W.2d 170.
  2. In a decision so illogical the legislature had to step in and clean it up, and which might be the worst Supreme Court decision in family law ever, this very Supreme Court held in Lang v. Lang, 161 Wis.2d 210, 467 N.W.2d 772 (1991) that life insurance proceeds and a right of survivorship in joint tenancy are not subject to division (note that the court at least used the proper terminology) because the statute does not specifically so provide (since corrected by statute).  Now it appears that the Supreme Court is inventing a new form of non-divisible property, which is presumably what they mean by “individual property,” contrary to their holding in Lang.
  3. In any event, since when is a disability policy “property,” rather than simply a stream of income?  So, the end result is a decision based on an unusual fact situation, which will have little, if any, applicability to other cases.

In my previous column, I suggested a couple of cases where, had the court granted review, it might have clarified a few areas of family law that would help practitioners.  Bad enough that the court felt it worthwhile to spend its time deciding a case that relies on its unusual facts, to affirm a decision that already corrected a potential error.  Worse, in the process, the court has used language that may very well cause severe problems in future cases.

This article originally appeared in the Wisconsin Law Journal.

Attorney Gregg Herman is a founding partner of Loeb & Herman S.C. in Milwaukee, WI. He practices family law exclusively, and can be reached via e-mail or by calling (414) 272-5632.